Reflecting its southern bias, Nationwide has 15 per cent of its borrowers in arrears. But the society said this overstated the problem since many of these fall only briefly behind with their payments because of short-term difficulties. And Nationwide is able to agree rescheduled payments with many of the rest.
However, about 75,000 of Nationwide's 1 million borrowers are more than three months in arrears. Tim Melville-Ross, chief executive, said his society expected to see only a modest reduction in the nearly 6,000 homes it repossessed last year, this being a small improvement on the previous year.
'We really did bend over backwards to contain the possession figure to a relatively low level with comparison to whatever it might otherwise have been,' he said.
Mr Melville-Ross said he wanted to nail the suggestion that building societies will be quicker to repossess once house prices start to recover. However, societies might encourage troubled borrowers to trade down to stabilise their financial position.
Nationwide's comments came as it disclosed that it spent pounds 52.6m on restructuring last year despite making only 645 people redundant.
The costs of closing 58 estate agency offices and other measures left Nationwide's pre-tax profits nearly 9 per cent lower at pounds 184.6m. The results were hit by a 40 per cent increase in loss provisions to pounds 329.3m, although this was a smaller rise than that suffered by some of Nationwide's rivals.
Severance payments, including the compensation paid to the sacked director John Hutchinson, accounted for pounds 14.5m of the restructuring bill. Upkeep of vacant offices cost another pounds 17.5m; losses on disposals pounds 6.7m; and a goodwill write-off made up most of the rest.
Before these costs, profits at Nationwide, the second biggest society, were up 17.5 per cent at pounds 237.2m. Tougher lending criteria meant net mortgage balances rose by only pounds 400m to pounds 28.1bn, and gross assets edged up by less than pounds 1bn to pounds 35bn.
Total staff numbers fell by 1,500 to 13,200. This helped Nationwide to reduce its management expenses by 2.7 per cent, enabling the building society to cut the key cost-income ratio. This fell from 55.2 to 52.8 per cent, or to 48.1 per cent if the restructuring costs are ignored.
This is still higher than Nationwide's leading competitors. Mr Melville-Ross said he was aiming for a ratio of 40 per cent, and expected much of the necessary improvement to come from better computer systems rather than from further branch closures.
Mr Melville-Ross reaffirmed Nationwide's commitment to the 303- branch estate agency chain, despite an increase in losses from pounds 11.8m to pounds 15.4m. He said these results ignored some of the benefits of the business, such as its insurance sales.
Mr Melville-Ross said Nationwide had no plans to sever its relationship with Guardian Royal Exchange, the insurer much criticised for the poor investment performance of its with- profits life policies.
The adverse publicity was substantially misplaced, Mr Melville-Ross said. About 80 per cent of Nationwide's life insurance customers opted for GRE's better-performing unit- linked contracts. Nationwide has contacted the small number of customers whose GRE savings policies may fail to cover their mortgage loans.
John Wriglesworth, the UBS housing market analyst, said Nationwide was recovering from its previous poor state, highlighting improvements in capital strength ratios. 'A few years ago they were in the middle of the deep blue sea. Last year they could see the coast. Now they've got their feet on the ground, though they're still up to their necks in water.'
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